Global shares mostly rallied yesterday after Tokyo launched a massive stimulus package, with sentiment also cheered by accelerating economic growth in Britain and upbeat company results.
Awaiting the US Federal Reserve’s imminent interest rate decision, Wall Street won an opening boost from Apple, whose third-quarter earnings topped expectations.
US stocks later dipped. London stocks closed slightly higher, as data showed the British economy grew by 0.6% in the second quarter, after 0.4% expansion in the previous three months, despite Brexit fears.
In the eurozone, Frankfurt stocks grew by 0.7% and Paris was 1.2% up.
In London, the FTSE 100 up 0.4% at 6,750.43 points; Frankfurt — DAX 30 up 0.7% at 10,319.55 points and Paris — CAC 40 up 1.2% at 4,446.96 points at the close yesterday.
“The markets benefited today from quite a good cocktail which reinforced their rise”, especially the Japanese stimulus plan, Saxo Bank’s Christopher Dembik said.
“The big amounts are quick to reassure the markets,” especially as there will be “probably other announcements”, he added.
The French market also climbed on solid earnings from aerospace giant Airbus, automaker Peugeot-Citroen, and luxury goods giant LVMH.
Shares in Airbus lifted more than 4%, while Peugeot-Citroen revved 9.3% higher and LVMH won 7.5%.
Prime Minister Shinzo Abe unveiled the ¥28tn ($266bn) programme days before the Bank of Japan holds its own meeting that is widely expected to see it loosen monetary policy.
Bolstered by a landslide parliamentary election win earlier this month, Abe had promised to ramp up spending on the stuttering economy following Britain’s shock vote to leave the EU dampened the global outlook.
Promises of support from governments and central banks around the world since the Brexit vote last month have provided the foundation for recent big gains across equities markets.
Tokyo stocks ended the day 1.7% higher.
The dollar rose to ¥105.71 from ¥104.64. “The weakness in the yen...has been driven by a speech from Abe announcing plans for more than ¥28tn worth of stimulus,” said economist Jeremy Cook at foreign exchange traders WorldFirst.
“How much of this is new spending is unclear with a full policy announcement expected.”
The BoJ ends its gathering Friday and is widely tipped to unveil fresh stimulus as the world’s number three economy struggles and inflation is virtually non-existent.
But while expectations of new measures have boosted Japanese stocks and sent the yen tumbling — helping exporters — analysts warned of a sharp sell-off if policymakers disappoint.
The immediate focus is now on the Fed, which ends its meeting later.
While it is not expected to announce any new policy measures, dealers are keen to see its appraisal of the US economy and plans for interest rates in light of a string of positive data, including on jobs.
“The bigger surprise would be if the Fed walked a dovish line in the directive, creating an impression for the market that a rate hike will likely wait until 2017,” said Briefing.com analyst Patrick O’Hare.
While the Nikkei soared, other markets stuttered.
Hong Kong ended 0.4% up and Sydney was marginally higher.
Shanghai tumbled 1.9% following a report that China’s banking regulator was considering clamping down on the nation’s multi-trillion-dollar wealth management products market.
Visitors pass a sign inside the London Stock Exchange. The FTSE 100 closed up 0.4% to 6,750.43 points yesterday.
